Which US banks will crash? Paulson to decide

Henry Paulson the US Treasury secretary and bank regulators will decide which banks get an injection of government money and which banks will not. Analysts predict that some of America’s 8,400 banks will not get any money and could be swallowed up by the larger banks who do.

As the stock market mirrored what analysts have been saying yesterday, with the bigger banks that are more likely to be helped by the government seeing increase in their share prices, however the smaller capital starved institutions saw a decline in their shares amid investors fear.

The US government will be injecting $250 billion into the banking system and in return will receive warrants in the financial institutions that it helps. This will gives it the right to buy stock in the bank later. The banks will then have to pay dividends of 5 percent on the shares rising to 9 percent after 5 years. The 4 percent rate jump is to provide an incentive for banks to repay the taxpayers before the 5 year rate change comes into place.

Source: latimes